The future of Volkswagen after CEO resignation, emissions scandal
Volkswagen’s chief executive officer Martin Winterkorn resigned Wednesday after a growing scandal that shed light on 11 million falsified emissions tests from the German carmaker.
“I am shocked by the events of the past few days,” Winterkorn, 68, said in a statement released Wednesday. “Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.”
Accepting responsibility for the ordeal, Winterkorn insisted that he personally had committed no misconduct. “I am doing this in the interests of the company even though I am not aware of any wrong doing on my part,” he said.
News of Winterkorn’s resignation comes one week after the company admitted that some diesel cars in the United States contained software designed to evade emissions tests. On Tuesday, Volkswagen said that 11 million cars worldwide contained the software.
Volkswagen shares lost almost a quarter of its market value after the news broke, according to Bloomberg, plunging as much as 23 percent.
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Inside the emissions scandal
A report by the EPA and the California Air Resources Board states that Volkswagen has known for more than a year that American inspectors had discovered something unusual taking place with diesel cars made under the Volkswagen and Audi brands, according to NPR. The first discovery was made in May of 2014 when researchers found wide irregularities when they compared the diesel cars’ performance in emissions tests to real-world driving conditions.
Upon further investigation, it was discovered that when the 4-cylinder diesel cars detected they weren’t hooked up to widely used emissions testing equipment, they “emitted up to 40 times more pollutions than allowed under U.S. standards,” wrote NPR.
The violations, which affect nearly half a million vehicles, could result in as much as $18 billion in fines based on the cost per violation and the number of cars. Criminal prosecution is also possible.
Who will replace Winterkorn?
With the exit of Winterkorn, two candidates have been named as potentials for succession. Fortune has named Matthias Müeller and Herbert Diess.
Matthias Müeller, 62, is the CEO of Porsche and German reports have centered on Müeller as being the one to take over Volkswagen. He did an apprenticeship as a toolmaker for Audi, a subsidiary of Volkswagen, before starting university studies. Müeller has been with Porsche for over 30 years and it doesn’t hurt that Porsche SE holds half of Volkswagen’s shares.
Herbert Diess, 57, is the head of Volkswagen’s Passenger Brand. Prior to that, he was head of development at BMW. He has developed a reputation for cost-cutting and saving BMW USD$4 billion in car parts purchases, according to Fortune.
“I am convinced that the Volkswagen Group and its team will overcome this grave crisis,” Winterkorn said as his closing statement.
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.